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Ontario goes green with latest bond sale

By James Noble

September 25, 2014

Ontario will issue the first green bonds from a Canadian province, with the intention of raising $500 million for Toronto’s Eglinton Crosstown light rail transit.

Green bonds are debt instruments issued to raise capital for projects with specific environmental benefits. The scope of projects categorized as “green” is determined by the issuer and Ontario has nominated five project types that qualify: clean transportation; energy efficiency and conservation; clean energy and technology; forestry, agriculture and land management; and climate adaption and resilience.

Green bonds are similar to traditional bonds except that their proceeds are exclusively used to finance approved environmental projects. The Eglinton Crosstown light rail transit project is a 19-kilometre, 25 station system that will run east-west across mid-town Toronto. The total cost for the project is an estimated $5.3 billion; the project is expected to replace buses and be operational by 2020.

The Ontario green bond investment is considered a “win-win” for Ontarians, in that it will help finance transit and other environmentally friendly projects across the province, support job creation, and potentially establish a Canadian-dollar green bond market by attracting investors looking for greener investment opportunities. The securities themselves will have a shorter maturity of three to seven years as opposed to Ontario’s average bond term of 13.6 years.

While green bonds are new to the provinces, the federal government and Canadian businesses began issuing green debt instruments earlier this year. Export Development Canada, a Crown corporation that serves as the country’s export credit agency, issued its first green bond and raised US$300 million to reflect commitment to its Corporate Social Responsibility principles.

This past summer, Tandem Health Partners placed $231.5 million of green bonds as part of financing of two hospitals on Vancouver Island. The bonds were designated green because the project was expected to meet energy and greenhouse gas emission targets under the B.C. Climate Action Plan.